1
00:00:04,600 --> 00:00:07,040
Hello and welcome to another 
episode, the Winning Shop Fight 

2
00:00:07,040 --> 00:00:08,960
Podcast with me, your host Nick 
Truman. 

3
00:00:08,960 --> 00:00:12,320
I've got terrible hay fever in 
the UK, so sorry about my voice,

4
00:00:13,160 --> 00:00:16,320
but we've got a very, very 
exciting topic for today. 

5
00:00:16,320 --> 00:00:20,600
This is right up my street, so 
cup of tea filled out and you've

6
00:00:20,600 --> 00:00:22,800
got a nice little lemon tea I'm 
recording on my laptop today. 

7
00:00:22,800 --> 00:00:25,480
It's a little lemon tea there 
and recording on my laptop 

8
00:00:25,480 --> 00:00:28,080
today. 
Because our office is in boxes 

9
00:00:28,080 --> 00:00:30,680
in a storage unit which is 
provided by one of our clients, 

10
00:00:30,720 --> 00:00:32,759
I don't have permission to say 
their name, but as soon as I do,

11
00:00:32,759 --> 00:00:34,720
I'll shout them out. 
But yeah, we're going to be 

12
00:00:34,720 --> 00:00:36,920
talking about something that's 
right up my street, which is, 

13
00:00:37,360 --> 00:00:41,480
I've called it revenue versus 
profit ads, revenue versus 

14
00:00:41,480 --> 00:00:44,360
profit. 
So let's talk about how people 

15
00:00:44,360 --> 00:00:47,400
look at advertising. 
I'm going to focus on Google 

16
00:00:47,400 --> 00:00:49,640
because that's my world. 
This applies to Meta and other 

17
00:00:49,640 --> 00:00:51,640
places. 
But let's have a little chat 

18
00:00:51,640 --> 00:00:54,360
today, guys, over a nice little 
cup of herbal tea. 

19
00:00:54,960 --> 00:00:57,080
And let's have a conversation 
about the difference between 

20
00:00:57,080 --> 00:01:00,120
revenue and profit, why it's 
important, and actually where a 

21
00:01:00,120 --> 00:01:02,680
lot of brands are kind of 
shooting themselves in the foot 

22
00:01:02,680 --> 00:01:04,840
and shouldn't be. 
And this is really important. 

23
00:01:05,040 --> 00:01:09,160
The reason this is so important 
is I look at hundreds, possibly 

24
00:01:09,160 --> 00:01:11,800
thousands of brands every year, 
every three or four years. 

25
00:01:12,160 --> 00:01:15,040
And one of the things I see over
and over again is there's such a

26
00:01:15,040 --> 00:01:18,920
high reliance in terms of the 
percentage of revenue that comes

27
00:01:18,920 --> 00:01:22,560
from advertising. 
That's not a bad thing, but then

28
00:01:22,560 --> 00:01:25,440
brands don't operate like that 
and I think we need to. 

29
00:01:25,440 --> 00:01:27,600
It's certainly something I've 
learnt kind of in more recent 

30
00:01:27,600 --> 00:01:30,000
years in my career, doing this 
since 2007. 

31
00:01:30,240 --> 00:01:31,440
So yeah, heading towards 20 
years. 

32
00:01:31,960 --> 00:01:33,920
Something I've learnt the more 
recent years is that the numbers

33
00:01:33,920 --> 00:01:35,520
will tell you everything you 
need to know. 

34
00:01:35,600 --> 00:01:37,720
And I've learnt that from my FD 
Mike. 

35
00:01:37,760 --> 00:01:40,640
I've learnt that from an advisor
I've got and I've learnt that 

36
00:01:40,640 --> 00:01:42,040
from working with so many 
clients. 

37
00:01:42,040 --> 00:01:43,640
The numbers will tell you what 
you need to know. 

38
00:01:43,640 --> 00:01:44,920
So today we're going to talk 
about numbers. 

39
00:01:45,160 --> 00:01:47,400
You will need a pen and a piece 
of paper if you're going to take

40
00:01:47,400 --> 00:01:48,440
it seriously. 
If you're listening on a 

41
00:01:48,440 --> 00:01:51,000
treadmill or something else, 
iPhone notes, Pause the 

42
00:01:51,000 --> 00:01:53,080
treadmill, take a look like play
the treadmill. 

43
00:01:53,120 --> 00:01:55,320
Everybody needs a little break 
when they're out on a run at the

44
00:01:55,320 --> 00:01:56,840
gym. 
Anyway, let's talk about this. 

45
00:01:56,840 --> 00:02:01,320
So let's start with the basics 
and why this is an issue and 

46
00:02:01,320 --> 00:02:02,760
where brands I think are going 
wrong. 

47
00:02:03,080 --> 00:02:07,400
The first thing is most products
that brands sell have different 

48
00:02:07,480 --> 00:02:11,200
margins and this is either net 
or gross margin. 

49
00:02:11,200 --> 00:02:15,440
Net margin being, OK, the 
product's worth $100 and it 

50
00:02:15,440 --> 00:02:18,120
costs US 50 to get. 
So we've got a Net margin of 

51
00:02:18,120 --> 00:02:21,200
$50.00 to play with. 
It's smaller than that because 

52
00:02:21,200 --> 00:02:22,920
of all the other things that we 
need to think about. 

53
00:02:22,920 --> 00:02:27,600
But Net margin is, is you've got
that gross margin will be to run

54
00:02:27,600 --> 00:02:29,600
the business. 
It costs us all our business 

55
00:02:29,600 --> 00:02:31,480
costs divided by how many 
products we sold that month or 

56
00:02:31,480 --> 00:02:33,280
how many products we've bought, 
depending on which way you want 

57
00:02:33,280 --> 00:02:35,680
to run your accounts. 
Gross margin takes into account 

58
00:02:35,680 --> 00:02:36,840
all of that. 
So you might say we've got an 

59
00:02:36,840 --> 00:02:39,920
80% Net margin on the product. 
After all the business costs, 

60
00:02:39,920 --> 00:02:43,960
we've got about a 30, maybe 35% 
margin on that product. 

61
00:02:44,520 --> 00:02:47,640
But then we've got one product 
here which costs $20 and it 

62
00:02:47,640 --> 00:02:51,480
costs us 15 to sort of buy it, 
get it on the shelf, deliver it,

63
00:02:51,480 --> 00:02:54,560
sell it, etcetera, and then 
deliver it off the customer and 

64
00:02:54,560 --> 00:02:56,200
import taxes, blah, blah, blah, 
blah. 

65
00:02:56,640 --> 00:03:00,040
So you might find that the lower
product costs, the smaller the 

66
00:03:00,040 --> 00:03:02,720
margin tends to be. 
But also like actually having a 

67
00:03:02,720 --> 00:03:07,000
20% margin, although it sounds 
bad, in essence, if a product 

68
00:03:07,000 --> 00:03:10,360
was to cost $5000, the 20% 
margin is $1000. 

69
00:03:10,920 --> 00:03:14,200
And it's only relative to things
like click costs, salaries, 

70
00:03:14,200 --> 00:03:17,000
running the business and if you 
can, if you can deliver and it 

71
00:03:17,000 --> 00:03:21,320
will sell and deliver to a 
customer a $5000 product in 

72
00:03:21,320 --> 00:03:22,880
actually the same way. 
Let's say it was nice with 

73
00:03:22,880 --> 00:03:25,920
jewellery is a good example, 
expensive item of jewelry, 

74
00:03:26,240 --> 00:03:29,160
fairly simple and easy to ship 
to deliver. 

75
00:03:29,440 --> 00:03:31,560
And you could probably get a 
smaller margin. 

76
00:03:31,560 --> 00:03:34,560
You've got a bigger total amount
and the click costs are going to

77
00:03:34,560 --> 00:03:36,040
be the same. 
If you were selling like phone 

78
00:03:36,040 --> 00:03:38,400
cases or something. 
There are some nuances in click 

79
00:03:38,400 --> 00:03:41,320
cost, but generally they're all 
pretty close to about a pound or

80
00:03:41,320 --> 00:03:43,360
a dollar. 
Some cost quite a bit more, some

81
00:03:43,360 --> 00:03:44,920
less. 
It depends on the margins, it 

82
00:03:44,960 --> 00:03:46,240
depends on the competition, 
sorry. 

83
00:03:46,240 --> 00:03:48,440
And click cost. 
But my first point really is all

84
00:03:48,440 --> 00:03:53,480
products are different margins. 
So why then so people in Google 

85
00:03:53,480 --> 00:03:56,440
Ads and Meta ads and other 
advertising platforms say we've 

86
00:03:56,440 --> 00:03:59,560
got a three to one ROI target 
and it's like, well, hang on, 

87
00:03:59,560 --> 00:04:02,720
can we get, and we, we always 
ask immediately, can we get your

88
00:04:02,920 --> 00:04:05,400
product costs or at least the 
margins. 

89
00:04:05,720 --> 00:04:08,840
So if this product costs $100 
and it's got a 70% margin, we 

90
00:04:08,840 --> 00:04:10,920
know we've got $70.00 to play 
with. 

91
00:04:11,320 --> 00:04:14,080
If we're spending more than 
that, we really are losing here.

92
00:04:14,920 --> 00:04:17,720
So flat row as doesn't really 
work. 

93
00:04:17,720 --> 00:04:20,920
You kind of need to look at the 
profitability of things now to 

94
00:04:20,920 --> 00:04:22,480
get a better idea as to what's 
going on. 

95
00:04:22,880 --> 00:04:26,720
Quick zip a tea. 
So an example here is you've got

96
00:04:26,720 --> 00:04:28,880
one product, it's got a 50% 
margin. 

97
00:04:29,560 --> 00:04:32,240
You've got another product, it's
got a 20% margin. 

98
00:04:32,840 --> 00:04:36,600
The one that's got a 50% margin,
you need 2 to one net to break 

99
00:04:36,600 --> 00:04:39,080
even. 
So half of if you make, if you 

100
00:04:39,080 --> 00:04:42,320
sell it for $100.50 was what it 
cost to get you the product and 

101
00:04:42,320 --> 00:04:44,520
you got to spend $50.00 or less 
to sell it. 

102
00:04:44,520 --> 00:04:47,040
Still not going to make the 
business profitable, but just 

103
00:04:47,040 --> 00:04:48,800
the economics of that single 
product. 

104
00:04:48,960 --> 00:04:50,640
That's the idea. 
You've got a 50% margin on it, 

105
00:04:50,640 --> 00:04:53,720
but the one that's only got a 
20% margin, you need to make a 5

106
00:04:53,720 --> 00:04:58,800
to 1 ROI or 500% ROI. 
So you need $5 back for every 10

107
00:04:58,800 --> 00:05:01,360
you spend. 
So if that was a $100 product, 

108
00:05:01,880 --> 00:05:05,320
you can only spend $20 before 
you've already hit break even to

109
00:05:05,320 --> 00:05:09,640
sell that product. 
So conclusion, most brands we 

110
00:05:09,640 --> 00:05:12,960
talked to are making a loss on 
probably a bigger percentage 

111
00:05:12,960 --> 00:05:15,200
than they are ready to accept or
hear from us. 

112
00:05:15,760 --> 00:05:17,760
They're probably making a loss 
on a bigger percentage of their 

113
00:05:17,760 --> 00:05:20,040
products or a wider range of 
their products just on 

114
00:05:20,040 --> 00:05:22,520
advertising alone than they 
actually realise. 

115
00:05:22,520 --> 00:05:24,800
It's the eight sometimes it's 
called the 8020 rule. 

116
00:05:24,800 --> 00:05:27,400
There's this kind of magical 
philosophy that's often very 

117
00:05:27,400 --> 00:05:30,800
close to the reality that says 
actually 80% of your revenue's 

118
00:05:30,800 --> 00:05:32,960
made from 20% of the things you 
actually do and sell. 

119
00:05:33,320 --> 00:05:36,040
So if you can stop doing the 80%
wasting money and just do more 

120
00:05:36,040 --> 00:05:38,560
of the 20%, that 80% of 
revenue's going to grow. 

121
00:05:38,560 --> 00:05:40,600
The business is going to grow 
quite nice and quickly there. 

122
00:05:41,320 --> 00:05:43,840
So there's a few solutions to 
this problem. 

123
00:05:43,840 --> 00:05:45,600
Some you're already writing down
going, I need to check the 

124
00:05:45,600 --> 00:05:47,480
margins and all my products. 
You're like correct. 

125
00:05:47,480 --> 00:05:49,280
If that's one thing you're going
to take away and you've only got

126
00:05:49,600 --> 00:05:52,600
where are we 5 1/2 minutes to 
listen to this podcast today. 

127
00:05:52,680 --> 00:05:54,600
That's your learning. 
Go and look at margins, sort 

128
00:05:54,600 --> 00:05:57,320
your ads out. 
Bosch, I think you've ever said 

129
00:05:57,320 --> 00:05:59,000
that in the podcast. 
I say Bosch quite a lot. 

130
00:05:59,280 --> 00:06:02,240
Sounds really unprofessional, 
but like Bosch means yes, done 

131
00:06:03,240 --> 00:06:05,640
solutions. 
So number one is get better 

132
00:06:05,640 --> 00:06:08,280
margins. 
So talk to your supplier and 

133
00:06:08,440 --> 00:06:10,800
your suppliers and say, look, 
we're only getting a small 

134
00:06:10,800 --> 00:06:14,280
margin on this thing. 
So actually we need to, we need 

135
00:06:14,520 --> 00:06:17,600
a bigger margin on this second. 
Oh, oh, sorry, let's say get 

136
00:06:17,600 --> 00:06:19,240
better margins. 
There's multiple ways of doing 

137
00:06:19,240 --> 00:06:21,000
that, but why don't we talk 
supply and I'll come onto a few 

138
00:06:21,000 --> 00:06:23,880
more in a minute. 
The other thing you can do as a 

139
00:06:23,880 --> 00:06:26,160
solution to this, the second 
thing is you can split and test 

140
00:06:26,160 --> 00:06:29,760
campaigns accordingly. 
So actually if you if you manage

141
00:06:29,760 --> 00:06:33,080
your campaigns in a way of 
saying these products are on 20%

142
00:06:33,080 --> 00:06:36,240
margin, these are on 50, these 
are on 70 and kind of split it 

143
00:06:36,240 --> 00:06:38,880
into like 3-3 chunks. 
You can still have multiple 

144
00:06:38,880 --> 00:06:41,920
campaigns within each chunk. 
But now you're targeting based 

145
00:06:41,920 --> 00:06:44,920
on margin. 
And the campaign in most 

146
00:06:44,920 --> 00:06:48,240
advertising platforms is where 
you set the target. 

147
00:06:48,560 --> 00:06:51,800
So if you say, if you say the 
campaign target is 4 to 1 and 

148
00:06:51,800 --> 00:06:54,520
some of your products, so that's
25% margin, but some of your 

149
00:06:54,520 --> 00:06:57,280
products only have a 10% margin 
and you're trying to get a four 

150
00:06:57,280 --> 00:06:59,240
to one. 
If that's wrong, it's bad. 

151
00:06:59,240 --> 00:07:02,560
You're losing money on those. 
You need 1000% margin to make 

152
00:07:02,680 --> 00:07:06,040
break even on a 10. 
Sorry, you need 1000 to one ROI,

153
00:07:06,640 --> 00:07:12,000
sorry, thousand percent, 12:50 
ROI 1000% sorry, 1000% is row as

154
00:07:12,000 --> 00:07:16,080
return on ad spend and the 12:50
ROI is return on investment. 

155
00:07:16,080 --> 00:07:18,720
They're the same metric ones as 
a percentage, ones as A and 

156
00:07:18,960 --> 00:07:21,040
they're both net. 
So they're just looking at price

157
00:07:21,040 --> 00:07:23,200
of product versus advertising 
cost. 

158
00:07:23,960 --> 00:07:27,560
So again, if you've only got a 
10% margin and you're going for 

159
00:07:27,560 --> 00:07:31,320
an ROI of four, ROI of four says
25% margin. 

160
00:07:31,440 --> 00:07:34,080
So it's 2 1/2 times where you're
profitable. 

161
00:07:34,080 --> 00:07:35,840
So you're making a 2 1/2 times 
loss. 

162
00:07:35,840 --> 00:07:39,120
If you just hit target on those 
items, you see the problem. 

163
00:07:39,520 --> 00:07:43,000
So splitting campaigns 
accordingly is really important.

164
00:07:43,280 --> 00:07:44,960
It's not as simple as just 
splitting them. 

165
00:07:45,680 --> 00:07:48,840
And if you have say, you had 
four different types of leather 

166
00:07:48,840 --> 00:07:51,800
shoe for men, it's going to be 
the same keyword. 

167
00:07:52,040 --> 00:07:54,800
So having one in one campaign, 
one in another, one in another, 

168
00:07:54,800 --> 00:07:57,640
one in another based on the 
different margins you've got. 

169
00:07:58,080 --> 00:07:59,920
What you're doing is you're 
actually confusing Google a 

170
00:07:59,920 --> 00:08:03,520
little bit now or Meta in terms 
of saying probably more so on 

171
00:08:03,520 --> 00:08:06,160
Google because it's the same 
keyword and Google will go, 

172
00:08:06,160 --> 00:08:08,080
well, which of those 4 campaigns
do you want me to show you for 

173
00:08:08,080 --> 00:08:10,280
that keyword? 
It will probably choose the one 

174
00:08:10,280 --> 00:08:13,480
with the lowest ROI target 
because it's like I can spend 

175
00:08:13,480 --> 00:08:16,080
more at that rate. 
And also somebody might still 

176
00:08:16,080 --> 00:08:18,960
click on that product, the one 
with the big margin, they'll 

177
00:08:18,960 --> 00:08:21,720
click on the big margin product 
with the lower ROI target to 

178
00:08:21,720 --> 00:08:23,560
achieve profitability. 
They'll click on that and go and

179
00:08:23,560 --> 00:08:27,120
buy a smaller, lower margin 
product elsewhere. 

180
00:08:27,560 --> 00:08:29,880
So with ads, you need to look at
what are we advertising versus 

181
00:08:29,880 --> 00:08:32,559
what people are actually buying.
So if they land on an expensive 

182
00:08:32,559 --> 00:08:35,799
item and that expensive item 
product page recommends lots of 

183
00:08:35,799 --> 00:08:38,880
cheaper items, your website's 
not working. 

184
00:08:38,880 --> 00:08:41,240
Is it, let's be honest, like you
want to make money, you want to 

185
00:08:41,280 --> 00:08:43,919
sell the most expensive or 
highest margin items, not always

186
00:08:43,919 --> 00:08:45,800
most expensive. 
You're going to sell the highest

187
00:08:45,800 --> 00:08:47,800
margin items, the ones that are 
going to make you the most 

188
00:08:47,800 --> 00:08:49,720
profit, the ones that are going 
to sell really easily and have 

189
00:08:49,720 --> 00:08:52,280
good conversion rates. 
You want to sell those. 

190
00:08:52,480 --> 00:08:54,360
You don't want someone landing 
on that and then finding a 

191
00:08:54,360 --> 00:08:57,000
really cheap one where it's like
actually, we're just break even 

192
00:08:57,000 --> 00:08:59,280
on that product. 
And if you're just break even, 

193
00:08:59,280 --> 00:09:01,040
you probably shouldn't have it 
on your store at all. 

194
00:09:01,040 --> 00:09:03,600
Economically, it's a terrible, 
terrible thing to have a break 

195
00:09:03,600 --> 00:09:05,320
even product. 
And that's break even before 

196
00:09:05,320 --> 00:09:07,200
you've even spent anything or 
run the business. 

197
00:09:07,200 --> 00:09:09,400
So you know you're going to make
a loss selling that product. 

198
00:09:09,960 --> 00:09:12,040
The second thing, yeah, split 
and test campaigns accordingly, 

199
00:09:12,200 --> 00:09:14,680
but you need to be really 
strategic about how you split 

200
00:09:14,680 --> 00:09:16,680
and test those. 
Get that wrong, ruins 

201
00:09:16,680 --> 00:09:18,040
everything. 
And you might like and make the 

202
00:09:18,040 --> 00:09:19,880
point right and start, you might
not even know. 

203
00:09:20,200 --> 00:09:21,280
You might think ROI is really 
good. 

204
00:09:21,280 --> 00:09:23,200
It's actually really bad. 
The third thing, you can 

205
00:09:23,200 --> 00:09:26,560
increase your product costs. 
Sorry. 

206
00:09:26,560 --> 00:09:29,480
You can input your product costs
into Shopify, So what the 

207
00:09:29,480 --> 00:09:32,800
product costs you. 
And that then gives you net 

208
00:09:32,800 --> 00:09:34,960
profitability. 
Depending on how you're running 

209
00:09:34,960 --> 00:09:38,600
your campaigns in Google Ads and
other platforms, you might then 

210
00:09:38,600 --> 00:09:42,280
actually have some data to say, 
I can split test now based on 

211
00:09:42,280 --> 00:09:44,480
the profitability margin because
I've tagged all my products or I

212
00:09:44,480 --> 00:09:47,840
have that information in there. 
So within my feed now I can tag 

213
00:09:47,840 --> 00:09:50,360
products using the custom 
labels, and they could all go 

214
00:09:50,360 --> 00:09:54,160
into specific campaigns based on
margins. 

215
00:09:54,160 --> 00:09:58,240
So now we're being way more 
savvy and much smarter in the 

216
00:09:58,240 --> 00:10:02,280
way that you're approaching 
these things #4 you also, I 

217
00:10:02,280 --> 00:10:04,720
think part of the solution is 
you need to factor in some 

218
00:10:04,720 --> 00:10:07,640
margins to run the business. 
So what you need to work out is 

219
00:10:07,640 --> 00:10:10,200
they're called fixed costs. 
What am I and I, I have this for

220
00:10:10,200 --> 00:10:12,440
my agency. 
What are all my fixed costs at 

221
00:10:12,440 --> 00:10:15,080
the agency? 
So what, what are we allocating 

222
00:10:15,080 --> 00:10:17,200
to marketing right now? 
What are we allocating to 

223
00:10:17,200 --> 00:10:19,840
salaries across every single 
person? 

224
00:10:19,960 --> 00:10:22,360
What suppliers are we paying 
right now on a regular fixed 

225
00:10:22,360 --> 00:10:24,560
basis? 
Our off I've mentioned the thing

226
00:10:24,560 --> 00:10:28,560
which office costs, consultants 
that we work with, our finance 

227
00:10:28,560 --> 00:10:33,200
guys, subscriptions we pay for 
like ChatGPT tools we use, all 

228
00:10:33,200 --> 00:10:35,840
that kind of stuff. 
We want to factor in all those 

229
00:10:35,840 --> 00:10:38,880
fixed costs and go the business 
just needs this much money per 

230
00:10:38,880 --> 00:10:41,560
month to operate. 
So for us to make that much 

231
00:10:41,560 --> 00:10:44,520
money per month, we need this 
much margin, as much kind of net

232
00:10:44,520 --> 00:10:47,200
products sold to run the 
business. 

233
00:10:47,280 --> 00:10:50,800
Now we're at break even, so 
there might be a, we can say a 

234
00:10:50,800 --> 00:10:53,120
lot of businesses come back and 
say, look, we can spend 10, 

235
00:10:53,120 --> 00:10:56,160
twenty, 40% of all of our 
revenue on marketing and they 

236
00:10:56,160 --> 00:10:58,680
agree what that percentage is. 
So Mike, a lot of businesses 

237
00:10:58,680 --> 00:11:02,040
just go, we got a 50% margin. 
So 25% of the whole business 

238
00:11:02,040 --> 00:11:04,440
we're going to spend on all 
advertising, but that includes 

239
00:11:04,440 --> 00:11:06,880
the cost of the marketing team 
and everything else. 

240
00:11:06,880 --> 00:11:09,640
Then we've got another 25% to 
run our fixed costs in the 

241
00:11:09,640 --> 00:11:12,320
business. 
But all agencies advertising 

242
00:11:12,560 --> 00:11:15,840
costs got to come out of the, 
the 25%, which means we need to 

243
00:11:15,840 --> 00:11:17,720
make probably like a four to one
ROI target. 

244
00:11:18,760 --> 00:11:20,560
Again, these are rough maths. 
And where it falls down is the 

245
00:11:20,560 --> 00:11:23,600
first thing I said, which is the
product margins are different 

246
00:11:23,600 --> 00:11:25,040
per product. 
Even if you think they're the 

247
00:11:25,040 --> 00:11:26,920
same. 
We, we've had companies before 

248
00:11:26,920 --> 00:11:29,320
say, oh, just just assume it's 
40% margin. 

249
00:11:29,320 --> 00:11:30,720
Like that's, that's nice and 
safe. 

250
00:11:31,000 --> 00:11:33,720
And then we get into the nuances
and go our best selling 20 

251
00:11:33,720 --> 00:11:35,400
products that are 80% of our 
sales. 

252
00:11:35,400 --> 00:11:38,560
So 80% of the products we're 
selling have way worse margins 

253
00:11:38,560 --> 00:11:40,960
than that, like less than half. 
We're just losing money on 

254
00:11:40,960 --> 00:11:42,680
Google Apps but everyone thinks 
it's a success. 

255
00:11:43,360 --> 00:11:45,440
Can't scale a problem. 
I set the clients a lot, don't 

256
00:11:45,440 --> 00:11:47,440
scale a problem, fix the problem
then we scale. 

257
00:11:47,720 --> 00:11:49,840
So factor in those business 
running costs. 

258
00:11:50,080 --> 00:11:53,160
So 4 things you focus on for 
growth then. 

259
00:11:53,240 --> 00:11:56,640
I love numbers season 4 and the 
first one is lower product 

260
00:11:56,640 --> 00:11:59,200
production costs. 
Here comes the caveat. 

261
00:11:59,200 --> 00:12:02,400
Whilst increasing quality. 
That is not an oxymoron. 

262
00:12:02,440 --> 00:12:05,680
They are not opposites you will 
find with most of your supplies.

263
00:12:05,720 --> 00:12:07,080
And I and I bought my own 
products. 

264
00:12:07,080 --> 00:12:08,640
I sold my own products at the 
Shopify store before. 

265
00:12:09,120 --> 00:12:11,000
I've had a play in this world 
that you guys live in. 

266
00:12:11,240 --> 00:12:13,120
It's a lovely world. 
It's very different to what I 

267
00:12:13,120 --> 00:12:14,160
do, which is why I don't do it 
anymore. 

268
00:12:14,520 --> 00:12:17,440
But if you talk to a supplier 
and say how many units do I have

269
00:12:17,440 --> 00:12:21,640
to buy to start getting some 
significant discounts, and then 

270
00:12:21,680 --> 00:12:24,600
they might say, yeah, you're 
paying us $10 per unit right 

271
00:12:24,600 --> 00:12:25,840
now. 
Quick zipity. 

272
00:12:27,880 --> 00:12:29,920
So if you watch this on video, 
the reason I say quick sip of 

273
00:12:29,920 --> 00:12:32,400
tea is anyone listening at home 
is like, hang on, does it stop? 

274
00:12:32,800 --> 00:12:34,840
If I say quick sip of tea, you 
know it's going to be a pause. 

275
00:12:35,120 --> 00:12:36,280
You can have a sip of tea as 
well. 

276
00:12:36,680 --> 00:12:39,720
And yeah, say you're paying $10 
per unit. 

277
00:12:40,240 --> 00:12:42,360
So per item that you're 
purchasing in at the moment, 

278
00:12:42,640 --> 00:12:46,040
they might say right now you're 
buying about 1000 units a month 

279
00:12:46,040 --> 00:12:49,720
and they're costing $10 each. 
So it's $10,000 a month. 

280
00:12:50,120 --> 00:12:55,360
If you double that to $20,000 a 
month, your unit cost would drop

281
00:12:55,360 --> 00:12:58,720
from $10 to 7 1/2. 
And you might, you might take a 

282
00:12:58,720 --> 00:13:01,880
view and go, do you know what 
we're selling phone cases or 

283
00:13:01,880 --> 00:13:06,400
we're selling sunglasses like I 
used to, or we're selling pens, 

284
00:13:07,400 --> 00:13:09,880
something that doesn't go off, 
it doesn't expire. 

285
00:13:10,520 --> 00:13:12,680
And we, we, we've been running 
this business for years now. 

286
00:13:12,680 --> 00:13:16,000
Let's, let's, let's borrow some 
money at some investment at a 

287
00:13:16,000 --> 00:13:19,360
lower percentage rate than the 
saving we've got by buying more 

288
00:13:19,360 --> 00:13:23,040
products in and without changing
anything to the customer, your 

289
00:13:23,040 --> 00:13:24,960
product costs have dropped by 
25%. 

290
00:13:24,960 --> 00:13:26,760
They've gone from $10 to seven 
and a half dollars. 

291
00:13:27,240 --> 00:13:29,320
I would also go back and 
negotiate, say someone else has 

292
00:13:29,320 --> 00:13:31,720
said they can make the same 
product, the same quality for 

293
00:13:31,720 --> 00:13:35,200
this much. 
And I, you know, I, I really 

294
00:13:35,200 --> 00:13:37,040
think you guys should rethink 
the pricing here. 

295
00:13:37,040 --> 00:13:39,680
Like, you know, could we come to
an agreement or actually, if we,

296
00:13:39,840 --> 00:13:42,040
here's another thing that some 
of my clients have done with 

297
00:13:42,040 --> 00:13:45,000
product sourcing, they've 
agreed, even though they're not 

298
00:13:45,000 --> 00:13:48,240
paying for it today, they've 
agreed to buy a minimum order 

299
00:13:48,240 --> 00:13:50,440
quantity for like the next three
years. 

300
00:13:50,800 --> 00:13:52,840
They know they're going to sell 
that amount of product. 

301
00:13:53,160 --> 00:13:54,880
And over those three years, 
they're allowed to tweak the 

302
00:13:54,880 --> 00:13:56,640
design, the colours and some of 
the variants. 

303
00:13:56,800 --> 00:13:59,040
But they've, they've already 
agreed like we're going to buy 

304
00:13:59,280 --> 00:14:02,760
20,000 units a month for the 
next three years. 

305
00:14:03,120 --> 00:14:05,520
And these guys might take a view
of it and say, all right, well, 

306
00:14:05,520 --> 00:14:09,080
we're going to give you a 20% 
discount if you sign a contract 

307
00:14:09,080 --> 00:14:11,840
agreeing to provide those. 
And you might even give them 

308
00:14:11,840 --> 00:14:15,440
favourable terms and say, right 
now we pay you 60 days after 

309
00:14:15,440 --> 00:14:17,360
you've after we've received the 
stock. 

310
00:14:17,360 --> 00:14:19,560
Now we're going to pay upfront 
because we have a 10% discount, 

311
00:14:19,840 --> 00:14:23,200
10% discount means you've just 
increased your margin by more 

312
00:14:23,200 --> 00:14:26,320
than 10% because you factor in 
that's the buy cost, factor in 

313
00:14:26,320 --> 00:14:28,240
the sell cost. 
There's loads you can do with 

314
00:14:28,240 --> 00:14:30,440
product sourcing. 
And if you're starting to do 

315
00:14:30,440 --> 00:14:32,720
some of those things, you can 
also improve the quality and 

316
00:14:32,720 --> 00:14:35,640
say, do you know what we we 
would like a trial run of this 

317
00:14:35,640 --> 00:14:37,880
product. 
What kind of deal could you give

318
00:14:37,880 --> 00:14:39,440
us on a trial run of that 
product? 

319
00:14:39,680 --> 00:14:42,520
The better the deal you could 
give us on a trial run of that 

320
00:14:42,520 --> 00:14:46,200
product, the more of them we can
sell and the better we'll do 

321
00:14:46,200 --> 00:14:47,880
long term. 
So the first thing, look at your

322
00:14:47,880 --> 00:14:50,880
product production and try and 
lower the cost of that. 

323
00:14:51,320 --> 00:14:53,440
One more solution. 
I want to give to that and I'm 

324
00:14:53,440 --> 00:14:55,440
not going to suggest who because
we're trying to get them on the 

325
00:14:55,440 --> 00:14:56,920
podcast. 
So delivery not say they are, 

326
00:14:57,400 --> 00:14:59,720
but if you're listening to this,
come on the show people be 

327
00:14:59,720 --> 00:15:02,240
interested in this. 
There are companies around the 

328
00:15:02,240 --> 00:15:06,240
world that have warehouses at 
some of the major airports where

329
00:15:06,240 --> 00:15:09,000
your products are manufactured. 
So these guys in particular have

330
00:15:09,000 --> 00:15:12,440
lots of warehousing in Shanghai 
within like 10 miles of the 

331
00:15:12,440 --> 00:15:15,480
airport. 
It's a lot cheaper to bulk buy 

332
00:15:15,480 --> 00:15:18,960
product, get discount on it. 
You can use that discount for 

333
00:15:18,960 --> 00:15:23,000
example, to store the product in
Shanghai and then just sit on 

334
00:15:23,000 --> 00:15:26,040
the smallest amount of quantity 
that you possibly need to in 

335
00:15:26,040 --> 00:15:29,720
your European or Pan American 
warehouse. 

336
00:15:30,080 --> 00:15:32,240
So you can have a much smaller 
warehouse go, we're just going 

337
00:15:32,240 --> 00:15:36,000
to sit on like 10 units of each 
thing because every single week 

338
00:15:36,000 --> 00:15:38,920
we've got another box of them 
coming across from Shanghai now.

339
00:15:39,160 --> 00:15:41,360
And the warehousing cost in 
Shanghai is next to nothing 

340
00:15:41,400 --> 00:15:43,040
compared to what it was in the 
US. 

341
00:15:43,240 --> 00:15:44,920
So we've saved the warehousing 
costs. 

342
00:15:45,360 --> 00:15:49,240
It's called sweating the asset. 
Find creative ways to make your 

343
00:15:49,320 --> 00:15:52,840
overheads and costs cheaper to 
get your product to customer. 

344
00:15:53,120 --> 00:15:56,320
Some companies now will actually
send the product straight from 

345
00:15:56,320 --> 00:16:00,920
Shanghai straight into the 
product, the customer's house in

346
00:16:00,920 --> 00:16:02,920
the US, in Europe. 
And again, doing things like 

347
00:16:02,920 --> 00:16:05,640
that you're, it makes you a 
little bit more immune to import

348
00:16:05,640 --> 00:16:07,600
taxes. 
You don't have to pay the import

349
00:16:07,600 --> 00:16:09,240
tax until you bring the product 
in. 

350
00:16:09,520 --> 00:16:11,960
There are people who have 
warehouses on the US, Mexico 

351
00:16:11,960 --> 00:16:14,600
border as well to do this. 
It's just the cheaper, smarter 

352
00:16:14,600 --> 00:16:17,960
way of storing products. 
Second thing that you can do for

353
00:16:17,960 --> 00:16:20,120
the for growth if you really 
want to start increasing growth 

354
00:16:20,120 --> 00:16:23,440
and increasing that margin. 
The second thing, businesses are

355
00:16:23,440 --> 00:16:27,280
terrified to do this and they 
should be wary of this, but I 

356
00:16:27,280 --> 00:16:29,640
think companies are too scared 
to do it and I've seen more 

357
00:16:29,640 --> 00:16:31,440
positives than negatives of 
companies doing this. 

358
00:16:31,640 --> 00:16:34,960
Put your product price up. 
Just whack the price up if it's 

359
00:16:34,960 --> 00:16:37,840
a popular product. 
We had, we had initially just 

360
00:16:37,840 --> 00:16:40,720
two different pairs of bamboo 
sunglasses we were selling and 

361
00:16:40,720 --> 00:16:43,760
one of them were bamboo arms and
then black plastic front. 

362
00:16:44,040 --> 00:16:48,600
The other one was a bamboo front
were polarised glasses, whereas 

363
00:16:48,600 --> 00:16:50,680
the other ones were just UVI 
can't remember the number now, 

364
00:16:50,680 --> 00:16:53,680
UV 400 or something, UV 
protection lenses that were 

365
00:16:53,680 --> 00:16:55,480
black. 
And then we also had plastic at 

366
00:16:55,480 --> 00:16:57,920
the front, bamboo at the sides. 
They were £20. 

367
00:16:57,920 --> 00:17:01,040
The other one was 40. 
We just they were both 20. 

368
00:17:01,040 --> 00:17:03,440
They actually cost us the same. 
Would you be I think it was 

369
00:17:03,440 --> 00:17:06,160
$1.00 more to bring in one that 
was polarised. 

370
00:17:06,480 --> 00:17:09,280
The actual front being wooden 
was like absolutely fine. 

371
00:17:09,760 --> 00:17:12,040
What was amazing though, is we 
they started it pretty much, I 

372
00:17:12,040 --> 00:17:14,000
think it was like 22 lbs and 20 
lbs. 

373
00:17:14,280 --> 00:17:17,359
And we just the black one, we 
kept it and we kept a really low

374
00:17:17,359 --> 00:17:20,720
amount of stock because it made 
the polarized fully bamboo ones 

375
00:17:20,960 --> 00:17:24,200
look more expensive. 
Bamboo is a cheaper material 

376
00:17:24,680 --> 00:17:26,440
than plastic. 
Well, it was when we were buying

377
00:17:26,440 --> 00:17:28,000
them. 
It was a cheaper material. 

378
00:17:28,480 --> 00:17:31,720
Bamboo was cheaper than plastic.
Plastic has to go up to high 

379
00:17:31,720 --> 00:17:33,360
heat, be melted into the right 
mold. 

380
00:17:33,560 --> 00:17:36,560
Bamboo can grow up to a foot a 
day in China. 

381
00:17:36,560 --> 00:17:38,560
Yeah, I did the marketing. 
So we were talking about how 

382
00:17:38,560 --> 00:17:41,360
much of A valuable renewable 
resource bamboo is. 

383
00:17:41,360 --> 00:17:43,600
If anyone's ever had a bamboo in
their garden, you know how much 

384
00:17:43,600 --> 00:17:45,400
of A disaster and nightmare The 
thing is. 

385
00:17:45,560 --> 00:17:48,120
Well, if you're trying to grow 
bamboo to make products out of 

386
00:17:48,120 --> 00:17:50,400
it, it's fantastic. 
They use it for scaffolding in 

387
00:17:50,400 --> 00:17:52,360
some countries. 
We use only metal here in the 

388
00:17:52,360 --> 00:17:54,120
UK. 
I don't know how safe it is, but

389
00:17:54,120 --> 00:17:57,240
just to show it's a really 
strong material and but you see 

390
00:17:57,240 --> 00:17:59,600
how we just kept upping the 
price of this thing. 

391
00:17:59,600 --> 00:18:02,240
So my second thing is don't be 
scared to up the price, 

392
00:18:02,440 --> 00:18:04,880
especially when you're small, 
less people know who you are. 

393
00:18:05,080 --> 00:18:08,520
And you can even say on the 
site, this price is going up. 

394
00:18:08,600 --> 00:18:11,920
It's currently $40. 
It's going up to $50.00 in three

395
00:18:11,920 --> 00:18:13,280
days. 
Builds emergency. 

396
00:18:13,280 --> 00:18:15,280
Get some more people buying. 
That might lower your 

397
00:18:15,280 --> 00:18:17,080
advertising cost to get someone 
to buy it. 

398
00:18:17,080 --> 00:18:19,360
Then the price goes up. 
Bang, new, higher price. 

399
00:18:19,600 --> 00:18:21,400
Never mentioned it was ever at 
the old price. 

400
00:18:21,400 --> 00:18:23,880
Just be at the new price now, 
keep increasing that. 

401
00:18:24,200 --> 00:18:27,320
While costs have been going up 
in all countries around the 

402
00:18:27,320 --> 00:18:29,680
world at the moment, especially 
in western society, cost to go 

403
00:18:29,680 --> 00:18:31,000
and up, cost to get more 
expensive. 

404
00:18:31,320 --> 00:18:35,000
People are not increasing their 
product prices at the same rate.

405
00:18:35,160 --> 00:18:37,000
What a fail. 
You're just eating into your 

406
00:18:37,000 --> 00:18:39,400
margins. 
Sometimes you just do it. 

407
00:18:39,400 --> 00:18:41,800
No one complaints. 
Conversion rate stays the same 

408
00:18:42,000 --> 00:18:44,160
and actually you're just, you're
literally just getting more 

409
00:18:44,160 --> 00:18:45,880
money for selling the same 
products. 

410
00:18:45,880 --> 00:18:48,080
Now you might find conversion 
rate drops a little bit. 

411
00:18:48,320 --> 00:18:51,680
We had one client who they 
doubled all their prices, no 

412
00:18:51,680 --> 00:18:53,360
warning overnight, just went 
bang. 

413
00:18:53,360 --> 00:18:55,440
It's now double. 
It was the kind of thing you 

414
00:18:55,440 --> 00:18:57,520
would only buy once, you 
wouldn't buy regularly. 

415
00:18:57,600 --> 00:19:01,680
We just doubled the prices. 
We had less than a 50% drop in 

416
00:19:01,680 --> 00:19:05,120
sales and get this, the amount 
of people that talked about 

417
00:19:05,120 --> 00:19:09,720
quality, product quality in the 
reviews increased dramatically. 

418
00:19:10,040 --> 00:19:11,760
So we were still selling more 
than half. 

419
00:19:11,760 --> 00:19:15,000
We were making double the money 
sending out like just over, I 

420
00:19:15,000 --> 00:19:17,760
think it was about 60% of the 
sales we kept. 

421
00:19:18,200 --> 00:19:22,560
So now we were only shipping 60%
of the products, but revenue was

422
00:19:22,560 --> 00:19:26,280
now up quite dramatically. 
And again, we're just massively 

423
00:19:26,280 --> 00:19:27,400
reduced the size of the 
business. 

424
00:19:27,640 --> 00:19:29,400
Now we just invested more in 
marketing and increased the 

425
00:19:29,400 --> 00:19:31,480
sales at the higher price. 
Genius. 

426
00:19:31,600 --> 00:19:33,080
There are so many case studies 
of this. 

427
00:19:33,240 --> 00:19:36,600
If something is premium, it has 
to cost a lot or it's clearly 

428
00:19:36,600 --> 00:19:39,240
not premium. 
Premium products are not cheap. 

429
00:19:39,520 --> 00:19:44,440
So have a real think about that 
quick zip a team, improve your 

430
00:19:44,440 --> 00:19:46,840
website marketing to improve 
AOV. 

431
00:19:47,400 --> 00:19:50,000
And that's just really basic. 
I could I could do day long 

432
00:19:50,000 --> 00:19:53,000
seminars, possibly week long 
seminars on average order value 

433
00:19:53,000 --> 00:19:56,280
and all the things you could 
test and how to work out what to

434
00:19:56,280 --> 00:19:58,480
test. 
But you need to get customers 

435
00:19:58,480 --> 00:20:01,640
adding another product cart, 
either the notification they get

436
00:20:01,640 --> 00:20:04,440
when they add a product, offer 
insurance. 

437
00:20:04,440 --> 00:20:07,080
If the product's worth over a 
certain amount, that's another 

438
00:20:07,080 --> 00:20:09,520
value add. 
Once someone's completed their 

439
00:20:09,520 --> 00:20:12,840
order, give them a discount on 
another item and a time limit of

440
00:20:12,840 --> 00:20:16,200
like you've got 20 minutes or 
half an hour to add this item. 

441
00:20:16,680 --> 00:20:18,680
And you can go and pay for it. 
There's no additional delivery 

442
00:20:18,680 --> 00:20:20,440
cost. 
We'll send it out with the first

443
00:20:20,440 --> 00:20:22,120
item or the items you've already
purchased. 

444
00:20:22,360 --> 00:20:25,520
But you can have 25% off 
anything on our site because we 

445
00:20:25,520 --> 00:20:28,880
know marketing costs us more 
than 25% or 10% off something. 

446
00:20:29,200 --> 00:20:31,320
And again, use AI to recommend 
what products. 

447
00:20:31,440 --> 00:20:34,600
It's so smart. 
And if you get, I think 3040% of

448
00:20:34,600 --> 00:20:38,840
people adding another product at
checkout post purchase and 

449
00:20:38,840 --> 00:20:41,000
adding it in, you know, in two 
transactions, you've got one 

450
00:20:41,000 --> 00:20:43,720
delivery cost. 
It's so simple. 1 customer to 

451
00:20:43,720 --> 00:20:47,040
deal with, one item to sell, one
lot of packaging to package 

452
00:20:47,040 --> 00:20:49,080
those products up. 
It's really, really smart, 

453
00:20:49,080 --> 00:20:50,600
really simple. 
There's loads of ways to do 

454
00:20:50,600 --> 00:20:52,120
this. 
And then the other one, I talk 

455
00:20:52,120 --> 00:20:54,600
about this so much and just kind
of a very, very light cover on 

456
00:20:54,600 --> 00:20:57,800
this, but lifetime value. 
If somebody buys twice from you 

457
00:20:57,800 --> 00:21:00,880
and the second order came 
through e-mail or just because, 

458
00:21:01,520 --> 00:21:03,480
I mean, I've got some on the 
actually I won't show them. 

459
00:21:03,680 --> 00:21:04,840
I don't have permission from 
those brands. 

460
00:21:04,840 --> 00:21:07,160
I've got some on my desk right 
now where products have arrived 

461
00:21:07,160 --> 00:21:09,960
and they have like a leaflet in 
saying here's 10% of your next 

462
00:21:09,960 --> 00:21:12,040
order. 
If you're making less than a 

463
00:21:12,040 --> 00:21:14,920
12:50 ROI, 10% of your next 
order, genius. 

464
00:21:14,960 --> 00:21:17,200
It's cheaper than marketing as 
much as I'm a marketing guy and 

465
00:21:17,200 --> 00:21:19,440
what the marketing budget. 
But if everybody starts making a

466
00:21:19,440 --> 00:21:22,440
second, third, 4th order from 
you, you've got that margin now 

467
00:21:22,440 --> 00:21:24,240
because they're making those 
orders. 

468
00:21:24,240 --> 00:21:26,440
You're not paying for the 
advertising, which is a really 

469
00:21:26,440 --> 00:21:28,320
stable business. 
If something goes wrong with 

470
00:21:28,320 --> 00:21:31,680
your advertising and it's 
driving 75% of everything that 

471
00:21:31,680 --> 00:21:34,640
is coming into your business, 
you have a very, very unsafe 

472
00:21:34,640 --> 00:21:36,920
business. 
One credit card issue, Google 

473
00:21:36,920 --> 00:21:39,960
gets confused and disables your 
entire account, which does 

474
00:21:39,960 --> 00:21:42,040
happen. 
Bang, you've got problems, 

475
00:21:42,160 --> 00:21:44,400
right? 
Do these four things well. 

476
00:21:44,640 --> 00:21:47,040
So lower product costs and 
increase quality at the same 

477
00:21:47,040 --> 00:21:50,840
time, increase product prices 
even just a little bit, just for

478
00:21:50,840 --> 00:21:54,760
now, and stretch AOV through 
better marketing and website 

479
00:21:55,160 --> 00:21:58,160
optimization. 
And #4 stretch the margin 

480
00:21:58,160 --> 00:21:59,760
through lifetime value as much 
as possible. 

481
00:21:59,760 --> 00:22:02,080
It's not the product margin. 
Get this repeat orders and that 

482
00:22:02,080 --> 00:22:04,680
the margin, the margins that 
you're making per customer from 

483
00:22:04,680 --> 00:22:07,480
customer acquisition cost to 
customer value is being 

484
00:22:07,480 --> 00:22:09,080
stretched. 
Do all of that and you can start

485
00:22:09,080 --> 00:22:11,440
chucking more money into 
advertising and you're doing it 

486
00:22:11,880 --> 00:22:13,920
particular profitably. 
There we go. 

487
00:22:13,960 --> 00:22:16,040
We've got the word out. 
Thanks for tuning in everybody 

488
00:22:16,040 --> 00:22:18,040
back again on Friday. 
We've recorded so many episodes 

489
00:22:18,040 --> 00:22:20,120
in advance now so excited as 
well. 

490
00:22:20,120 --> 00:22:22,280
One of my clients is coming on 
to show off their amazing 

491
00:22:22,400 --> 00:22:24,720
knitwear soon as well. 
I was wearing the jumper, but it

492
00:22:24,720 --> 00:22:26,400
was affecting I've got my mobile
microphone today. 

493
00:22:26,400 --> 00:22:28,160
It's affecting the microphone on
the zip. 

494
00:22:28,160 --> 00:22:31,280
So I I'll be wearing that in an 
episode soon as well with my 

495
00:22:31,280 --> 00:22:33,040
client Islands eye. 
They're absolutely amazing. 

496
00:22:33,040 --> 00:22:34,560
Thanks for tuning in. 
You guys have been great hit 

497
00:22:34,560 --> 00:22:36,160
subscribe if you haven't 
already, go and join our 

498
00:22:36,160 --> 00:22:38,720
newsletter and get involved in 
growth vault coming out in 

499
00:22:38,720 --> 00:22:40,280
September. 
It's going to be super exciting.

500
00:22:40,280 --> 00:22:41,680
So going to that thanks for 
tuning in. 

501
00:22:41,800 --> 00:22:42,440
Hope you join us again.